In February the Financial Sector Conduct Authority invited the public to comment on its bewildering draft strategy for promoting financial sector “transformation”. The press release stated that a “strategic objective of the FSCA” includes “supporting the transformation of the financial sector”. That was a misleading statement. The Financial Sector Regulation Act does not state that promoting sector transformation is an object of the FSCA.
The draft Conduct of Financial Institutions Bill states that a licensed financial institution that is subject to the Broad-Based BEE Act and its financial sector code must have a transformation plan, must conduct its business in a way that promotes transformation in a manner reasonably consistent with its transformation plan, and that the FSCA may make conduct standards for financial institutions.
The Financial Sector Regulation Act’s provisions state that the FSCA may revoke a licence it issued if the licensee contravenes a “financial sector law” in a material way, and defines a financial sector law to include a conduct standard made by the FSCA.
In proposing measures in phase 1 that are beyond the FSCA’s powers the draft strategy violates the basic precepts of the rule of law. The strategy also proposes measures in phase 2 that are likely to violate everyone’s fundamental right to freedom of association, assuming parliament enacts the Conduct of Financial Institutions Bill along its 2020 lines.
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